ND mineral resources director says Bakken in for some 'turbulence'

By Amy Dalrymple / Forum News Service

GRAND FORKS - North Dakota is projected to ultimately produce just under 1.6 million barrels of oil per day, but risk factors could threaten that production, the state’s top oil and gas regulator said Tuesday.

Department of Mineral Resources Director Lynn Helms told more than 800 people attending the North Dakota Petroleum Council’s annual meeting in Grand Forks that the industry is entering a final phase of development but should expect some bumps along the way.

“The Bakken has reached its cruising altitude. It is safe to get up and walk around the Bakken. But you really should sit down, buckle your seatbelt, because there will be turbulence,” Helms said

The main risk factors come from the federal government, Helms said, such as possible federal regulations on hydraulic fracturing.

Another threat comes from a lack of capacity in the refining market that could soften prices of Bakken crude, Helms said.

With the Bakken and the Eagle Ford shale in Texas producing more light, sweet crude, refineries can handle an additional 650,000 barrels of oil per day, Helms said.

“We’re going to gobble that up in a hurry,” he said.

North Dakota produced 874,460 barrels per day in July. Planned refineries in North Dakota won’t make much of a dent in that supply. A refinery under construction near Dickinson will have the ability to process 20,000 barrels per day.

That lack of refinery capacity means Bakken crude will need to compete with heavy, sour crude for refining and companies will need to incorporate potentially lower prices into their budgets for 2014, Helms said.

Helms told industry leaders the North Dakota Industrial Commission is working on policies to reduce natural gas flaring, which was at 30 percent in July.

The drilling rig count in North Dakota has stabilized at 185. Helms expects those rigs to continue drilling new wells for the next 20 years, adding 2,000 to 3,000 permanent jobs each year.

“We have a tremendous amount of work in front of us,” Helms said. “I commend you for how responsibly you’re approaching this process as we develop this amazing, amazing resource.”

The commission’s goals are to reduce the volume of natural gas that is flared, reduce the number of wells that are flaring and reduce the duration of flaring from wells, Helms said.

“The Industrial Commission is not interested in destroying the economics of the Bakken and Three Forks play in pursuit of this,” Helms told the oil and gas industry leaders. “But we do believe we can allow you to work on this and we can work with you and come up with policy that moves us faster toward achieving these goals.”

Brian Cebull, president and CEO of Montana company GTUIT Innovative Flare Solutions, told members about a portable technology his company provides that can reduce flaring.

For wells that are too remote to connect to pipelines or areas where the pipelines have not caught up with oil production, the technology strips natural gas liquids at the well site.

The valuable liquids, such as propane and butane, are captured and stored in tanks and trucked away from the well. The value of those liquids more than offset the cost of the system, Cebull said.

GTUIT handed out butane lighters during the meeting to illustrate a product that could be produced from the natural gas that would otherwise be wasted. One system can produce enough butane for 3.7 million lighters every five days.

“We can have a big impact on overall flaring in North Dakota,” Cebull said.

GTUIT has contracts with Hess Corp. and EOG to set up 18 systems in the Bakken. Several companies expressed interest in learning more about GTUIT’s technology, including Whiting Oil and Gas Corp.

Jack Ekstrom, vice president for corporate and government relations for Whiting, said even though Whiting has one of the lowest flaring rates in the state, it’s looking for ways to reduce that further. The wells that Whiting does flare are so remote there is no infrastructure in place, Ekstrom said.

“That’s what we’ve been looking for is solutions that will help you process it on the spot,” Ekstrom said.